3 Quality Dividend Stocks With No Russia Exposure

The current situation in Ukraine is just the latest episode of global geopolitical risk. The human tragedy that is unfolding in Ukraine is also having huge impacts on the world of investing. Episodes like this highlight companies that have high levels of geopolitical risk, as those companies tend to suffer if they have heavy operations in effected areas globally. However, it also highlights and strengthens the case for those companies that don't have exposure to the impacted areas. Here, we'll discuss three blue chip stocks that operate exclusively in North America, and therefore, have no exposure to the situation in Ukraine. We define blue chip stocks as those with at least 10 consecutive years of dividend increases, and all three of the stocks we'll look at offer very strong dividend characteristics. Lowe's Companies Our first blue chip is Lowe's , a mega-chain of home improvement stores that operates about two thousand locations in North America. Lowe's competes directly with rival Home Depot in what amounts to a duopoly in the lucrative home improvement segment, selling tens of thousands of products in-store and online. Lowe's was founded in 1921, generates almost $100 billion in annual revenue, and trades with a market capitalization of $149 billion. One of the main reasons we like Lowe's is because it has an exemplary history of earnings growth. The Great Recession was heavily tied to real estate, so home improvement stores suffered as construction activity fell off a cliff. That created a low base of earnings for Lowe's a decade ago, and in the 10 years since, the company has managed average annual earnings growth of about 22%. That's a clearly unsustainable level of growth, but we do see 6% annual growth going forward. Lowe's is not only seeing steady revenue growth, but it is buying back large amounts of stock as well, which will help boost earnings on a per-share basis through a lower float. In addition to strong growth, Lowe's has a world-beating dividend increase streak of 59 years. That makes the company a Dividend King, and puts it among the best-of-the-best on this measure. The payout ratio for this year is also just 24%, so the dividend is safe under any sort of reasonable scenario. The current yield is just 1.4%, which is essentially in line with the S&P 500, so Lowe's isn't a high-income stock. However, it has a lot of other attractive characteristics. Finally, the stock is trading for just 17 times this year's estimated earnings, well below our estimate of fair value at 20.5 times earnings, further bolstering the total return outlook in the years to come. Enbridge Inc. Our next stock is Enbridge , an energy infrastructure company. Enbridge operates five segments that collectively cover a wide variety of energy businesses. The businesses include pipelines, midstream, gas distribution, storage, renewable power, and more. The company was founded in 1949, generates about $39 billion in annual revenue, and trades with a $90 billion market capitalization. Enbridge has a somewhat spotty history of earnings growth, which is to be expected from an energy company. Price swings in commodities have a lot of impact on Enbridge's earnings, so that characteristic likely won't change. However, even so, the company has managed 5% annual earnings growth in the past decade. We see 4% moving forward, on average, in the five years to come. Enbridge doesn't buy back a huge amount of stock, so most of the gain in earnings should accrue from revenue and margin increases, particularly if high energy prices persist. Enbridge has an impressive 27-year dividend increase streak, which is all the better considering energy companies tend to struggle with earnings volatility from commodity price swings. Enbridge's payout ratio has moved a lot higher in recent years as the company has produced outsized dividend increases. That's good for the yield, and it means the payout ratio is about two-thirds of earnings for this year. We don't see this as a risk for the dividend, given Enbridge has proven its ability to pay the dividend over the long-term. However, it may keep a lid on increases in the coming years. The current yield is truly outstanding at 6.1%, so as an income stock, Enbridge checks all the boxes. We also see the stock as reasonably valued, coming in at 10.4 times estimated earnings for this year, slightly under our fair value estimate at 11 times. Consolidated Edison Consolidated Edison is our final stock, a massive utility company that operates in and around New York City. ConEd offers electric, gas, and steam power in the NYC metro area. It counts 3.5 million electric customers, 1.1 million gas customers, and about 1,500 steam customers. In addition, ConEd operates thousands of miles of distribution lines. The company was founded in 1823, produces almost $14 billion in annual revenue, and trades for a market capitalization of $32 billion. As one would expect, earnings growth has been muted for ConEd, as it is for most utilities. The company has managed less than 2% earnings-per-share growth in the past decade, and we see 3.5% moving forward. We think a small number of share repurchases, a minor improvement in margins, and gradually higher revenue can combine for 3.5% growth annually, on average. ConEd is also a top-tier dividend stock, having boosted its payout for 48 consecutive years. Utilities have steady and predictable earnings streams, in general, and that means that ConEd's 70% payout ratio for this year looks fine from a safety perspective. The current yield is 3.5%, which is almost triple that of the S&P 500, so it is a strong income stock as well. ConEd, unlike the other two in this list, is trading above fair value. The stock is going for 19.9 times earnings, ahead of our estimate of fair value at 16 times earnings. Final Thoughts Times of geopolitical risk can make it clear to investors just how fragile some companies' revenue and earnings streams are. In times like these, stocks that operate exclusively in North America can be safe havens of sorts, and we see Lowe's, Enbridge, and ConEd as three strong dividend stocks that look attractive right now.

3 Quality Dividend Stocks With No Russia Exposure

These blue chip stocks operate exclusively in North America, and therefore, have no exposure to the situation in Ukraine.

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